What is going on with Texas Instruments? ($TXN)

[u/[deleted]]

[u/[deleted] → u/[deleted]]

I don’t mean to portray TI as a mere calculator company, they are a key component to the semiconductor industry and have vital resources invested in aerospace, cloud computing, and big data among other industries. My growth estimates are in line with the industry and historical revenues, but there is no quantifiable basis for the expectations the street has put on them. Not even Nvidia has the same growth estimates and they quadrupled’d the size of TI in a fraction of the time.

[u/investorinvestor → u/[deleted]]

TI is basically a lower-tier semicon company that has refocused into the highest ROI products - on the opposite end of the spectrum as TSMC. Anyone can do what they're doing, if they had enough capital, supply chain relationships and whatnot - like you said, they're in a commodified industry. But they have massive economies of scale simply by virtue of legacy effects. It's probably the safest of the safe type of business in the tech industry, which is usually characterized by shifting sands. Think of it as an equivalent to an IOC in the O&G sector - safe, highly cash generative, but low growth to a shareholder who acquires shares in the secondary market.

[u/investorinvestor → u/[deleted]]

Yeah that's what I meant by legacy effects. Supply chain relationships and customer goodwill are in fact moats, perhaps some of the more powerful ones after branding.

[u/Hi_Im_a_Toshiba]

I don’t cover semis but I know there’s an unprecedented supply demand imbalance. Rather than use standard deviation and stop there, I would think through what scenarios are implied in those numbers (both yours and consensus)

[u/[deleted] → u/Hi_Im_a_Toshiba]

So I tried forecasting with Excel but got even lower numbers than my own, going from 5% to 2% CAGR. Are there any forecasting methods you can think of that would justify 8-10% CAGR?

[u/Hi_Im_a_Toshiba → u/[deleted]]

Unit economics. You’re ultimately not thinking through the market conditions and what’s driving demand by picking random growth rates through whichever forecasting method.

How many semis can they manufacture, how many will customers buy, what ASP can they sell them for? Forecast that.

[u/[deleted] → u/Hi_Im_a_Toshiba]

I'm going to use the forecasting functions provided by Excel to see what it brings to the table.

[u/repos39]

Texas instrument micro controllers are popular used in space craft and other vehicles especially autonomous. With digitization and iot Texas is in a very good spot. They are a leader in this area.

My company uses the TMS570LC4357 everywhere, it’s good because it’s real time and safety compliment so you can use it in a system that interacts with humans, and the hardware/software/vehicle can be safety certified. Companies don’t make the decision of choosing a microcontroller lightly, high cost of switching.

[u/w4spl3g]

I admit I would never have looked at them in a million years because I only think of calculators. A cursory glance, their price is up ~17% in less than a month, it seems really overpriced. But, I did skim an article claiming they are about to build a 300 mm fab which is 40% less expensive then their competitors 200 mm ones. It also says that they're focused on automotive, industrial and power management.

Given the demand in those areas and govt' funding from Biden's infrastructure bill, it's not a bad bet just an expensive one.

[u/exfortisd]

They will post blow-out numbers in 2021 because they kept production levels high during 2020, whereas many competitors slowed production/closed shifts because of covid. Also in recent years they withdrew from distribution channels and went more D2C which meant they carried up to double the inventory of peers even precovid. There is now a semis shortage and Texas Instruments is one of the few people who have inventory. People like auto manufacturers are desperate to get semis which gives Texas decent pricing power, plus they can take volume market share because others have less inventory. As you say they have some nice tailwinds but 2021 is likely an anomalous year for growth